“Tax is really interesting because increasingly companies are global and governments are, by definition national, and we’re seeing an increasing battle of who gets the revenue from these companies. The conflicts are greater than they have ever been,” Mark Weinberger, chief executive officer of Ernst and Young (EY) told CNBC Africa at the World Economic Forum Annual Meeting of the New Champions in China this year.
He explained that while the world has moved away from a focus on manufacturing and hard assets, and is now in the era of technology where most tasks can be completed around the globe at the click of a mouse, rigid taxation systems have fallen short.
“Taxation systems have not kept up with the change in business and you start seeing the group of twenty (G20) countries, the Organisation for Economic Co-operation and Development (OECD) and other major organisations working together to try and catch up to the world economy.”
He added that countries are competing with one another to attract international businesses by increasing incentives for research and development, allowing businesses to bring in their own employees as well as a reduction in their corporate tax rates.
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The difficulty however, he added, is that many countries are suffering from financial problems and desperately seeking to generate revenue in other sectors.
“There’s a big tax reform debate in the United States- they have to lower their corporate tax rate but they also need to narrow their deficits so how do they lower their corporate tax rate and what incentives are they going to take away? That is pretty much happening around the rest of the world too,” he explained.